18.31In this section we consider the following issues arising from our consideration of the submissions:
Statutes of limitations reflect a delicate balance among the plaintiff’s, defendant’s, and society’s interests. They are designed to create predictability, uniformity and fairness by preventing litigation of stale claims. Limitations periods must be long enough to protect the plaintiff’s and society’s interests in having the claim prosecuted. On the other hand, they must be short enough to protect the defendant, the court, and society from wasting time and resources litigating old claims. … To choose an appropriate limitations period, the legislature must evaluate the nature of the underlying cause of action, its policies, and society’s interests in having the right asserted. Then the legislature must select a reasonable time in which the plaintiff can discover, investigate, and assert his or her claim. The legislature must also estimate how long the evidence and witnesses will be available and reliable. The time period chosen is the period after which the need for repose and avoiding stale claims outweighs the interests in enforcing the claim.
…indicate an intention on the part of Parliament to shorten and confine the limitation period. That approach appears to have been a counterweight against the potential width and reach of the Act for the purpose of giving those engaged in trade some reasonable certainty as to when their potential liability under the Act will come to an end. Although the Act is consumer oriented Parliament has endeavoured to strike a balance between the concepts of protecting and compensating consumers and long exposure of traders to the risk of litigation.
18.35We have explored a number of policy issues to assess the desirability of modifying the Limitation Act approach for pecuniary penalties. First, the rationale for the Limitation Act model that applies to ordinary litigants is not necessarily the same in the context of regulatory enforcement.
18.36The policy factors relating to plaintiffs are somewhat different in the pecuniary penalty context. A key rationale for the six-year limitation period for civil claims is to allow plaintiffs sufficient time to bring legitimate claims before the courts. This includes making sufficient allowance for plaintiffs who may have capacity and disability issues, and allowing for latent issues to be uncovered. Enforcement bodies or regulators are in a different position to ordinary litigants, as these bodies are generally charged with oversight of a statutory regime, have regulatory monitoring powers and have State resources available to initiate proceedings. Responsive regulation, regulatory efficiency and market certainty may require a more nuanced approach – a standard six-year period, regardless of the date of discoverability, appears somewhat arbitrary in the regulatory context.
18.37While the same factors underlying the Limitation Act relevant to defendants do apply to pecuniary penalty limitation periods (such as fairness to intended defendants, certainty and not being disadvantaged by an overly long limitation period), it could be argued that they have greater strength in an enforcement context with the potential for punitive measures to be imposed.
18.38Secondly, there may be an issue of regulator discretion about which contraventions to prioritise in terms of enforcement action, taking account of the likelihood of success and the efficient allocation of regulatory resources. In some pecuniary penalty regimes, it might also be necessary to allow sufficient time for the regulator to work through the range of regulatory tools available in the enforcement hierarchy before resorting to penalty proceedings. Therefore, a longer limitation period might be attractive in terms of regulator flexibility.
18.39However, we note that the choice of enacting a pecuniary penalty provision may create a public or market expectation that proceedings will be initiated fairly promptly upon discovery (in the same way that there is a public assumption that a crime will be prosecuted promptly where there is sufficient evidence to proceed). The enactment of sizeable maximum pecuniary penalties in legislation, for sufficiently serious contraventions, is likely to give rise to a consequential enforcement expectation.
18.40Thirdly, while it can be argued that effective and responsive regulation requires enforcement action to be brought in a timely manner, contraventions may be particularly difficult to detect in some regimes (especially where they are actively hidden), and the enforcement body may need an adequate window of opportunity to discover the contravention. A discoverability approach would provide flexibility to deal with this issue, as well as the Limitation Act’s fraud exception to the longstop period.
18.41Fourthly, there is an argument that the Limitation Act’s late knowledge discoverability period adds little in the pecuniary penalty context, except where there is fraud or the regulated entity actively avoids detection, in which case section 48 could be used to extend the limitation period. In the absence of those circumstances, it may be difficult for an enforcement body to successfully argue for an extension of the six-year primary Limitation Act period. This is because the test for reasonable discoverability may be more strictly construed against an enforcement body, given its functions and resources, compared to an ordinary litigant. This suggests that the structure of the Limitation Act (primary period plus late knowledge extension) may not be optimal for pecuniary penalties.
18.43On balance, our conclusion is that the overall structure of the Limitation Act could result in limitation periods that are overly long for particular pecuniary penalty regimes. The Limitation Act is, arguably, not optimally suited to the context of regulatory enforcement, in which certainty, efficiency and regulatory responsiveness are key drivers. We prefer the development of a bespoke model limitation period for pecuniary penalty statutes. The model provision should be a streamlined version of the Limitation Act model, as we discuss further below. However, there may be particular cases where the full Limitation Act model can be justified.
18.46Reasons to consider adopting a primary limitation period structured around discoverability include the following:
18.47Arguments against adopting discoverability as the basis for the primary limitation period include the following:
18.48A primary period based on the discoverability concept could bring its own complexities about when an enforcement body might reasonably be expected to have discovered a contravention, potentially giving rise to interlocutory arguments, although this could be addressed in the drafting of the limitation provision. It might not actually be any shorter in some cases than a limitation period based on when a contravention occurs, although it might mean that some proceedings are brought more quickly when a contravention is discovered.
18.50On balance, our conclusion is that the advantages to using discoverability as the basis for the primary limitation period in the pecuniary penalty context outweigh the disadvantages, and that the disadvantages can be properly addressed.
18.51This was an issue raised in some of the submissions, suggesting that different limitation periods for pecuniary penalty orders and other civil orders such as compensation orders would be problematic. Statutes that contain both criminal offences and pecuniary penalties for the same type of conduct may also have different limitation periods.
18.52However, the different policy rationales for the different types of orders may, in our view, justify different limitation periods. In relation to compensation orders, the enforcement body is representing those who have suffered loss. This is more analogous to ordinary civil litigation between a plaintiff and a defendant.
18.54It could be argued that the pecuniary penalty primary limitation period should generally be no longer than five years (from the date of the conduct). This is consistent with the criminal limitation period for offences attracting larger fines and, being less than the six-year limitation period for ordinary civil claims, might reflect the different underlying policy factors in setting a limitation period for proceedings brought by enforcement bodies rather than ordinary litigants. It would provide consistency of limitation periods where offences and pecuniary penalties are created for the same conduct. The difficulty, however, is that the standard criminal limitation periods do not allow for situations where the breach is not uncovered for some time. As discussed above, we think the flexibility of the discoverability approach is desirable in a regulatory context to deal with these situations.
18.55On balance, our conclusion is that there is no compelling reason in principle for pecuniary penalty limitation periods to be strictly consistent with limitation periods that apply to different regulatory tools such as compensation orders or criminal offences. Although aligned limitation periods would allow maximum flexibility to enforcement bodies in selecting the type of proceedings to be initiated in response to the conduct in question, the requirements of regulatory efficiency and responsiveness require a more disciplined approach. Our view is that the limitation period should properly fit the particular method of enforcement. Differences can be justified by the different role and policy rationale for each form of regulatory response in the enforcement hierarchy.
18.56A discoverability approach for pecuniary penalties could mean that the limitation period might be shorter or longer than the five-year limitation period for criminal offences for the same conduct. This could, on occasion, influence a regulatory enforcement response – where a particular limitation period has expired the enforcement options available to the regulator may be reduced; however, the availability of alternative forms of proceedings provides a measure of flexibility that allows some form of enforcement to proceed.
18.57As noted above, the Criminal Procedure Act 2011 has introduced a measure of standardisation to the limitation periods for criminal offences. Similarly, the Limitation Act 2010 has consolidated the approach to limitation periods in civil proceedings. One policy consideration is whether departing from these established approaches is undesirable.
18.60The fact that many pecuniary penalty statutes depart from the Limitation Act (in a variety of ways) indicates that a default limitation period for pecuniary penalties needs to be considered. The policy factors discussed above suggest that the Limitation Act provisions may not be optimal in a regulatory enforcement context.
18.61On balance, our conclusion is that a default limitation provision for pecuniary penalties is not precluded by the law reform objectives of limitation law. The reasonable discoverability approach is present in the Limitation Act, such that a default provision based on discoverability could be viewed as a streamlining adjustment, rather than representing a substantive shift.
18.62The variety of limitation provisions in current pecuniary penalty statutes suggests that a new default provision may bring greater standardisation and uniformity than the status quo. It is difficult to justify the existing variety of approaches to pecuniary penalty limitation provisions, and there is a strong argument, in our view, in favour of a model provision that appropriately reflects the underlying policy considerations, rather than taking a case-by-case approach.
18.63The model approach preferred is one based on reasonable discoverability; however, the Limitation Act approach should also be available as a secondary option in circumstances where there may be a specific policy justification for applying that model.
18.64A desirable practice, in our view, would be for pecuniary penalty statutes to include express and comprehensive limitation periods. Developing a model provision would be useful to reflect the default approach proposed to pecuniary penalty limitation periods (three years after reasonable discoverability of the contravention, subject to a 10-year longstop, plus fraud exception). This model provision should also take account of ancillary issues, such as how the limitation period will operate in circumstances where there is a continuing contravention or a series of related contraventions, and how to adapt section 14 of the Limitation Act 2010 to the pecuniary penalty context (as to when an enforcement body ought reasonably to have gained knowledge of the contravention).
G20 Pecuniary penalty statutes should generally provide for a primary limitation period of three years after reasonable discoverability of the contravention, with a 10-year longstop (subject to a fraud exception)
Pecuniary penalty statutes should deal expressly with periods of limitation.
A model approach to limitation periods in pecuniary penalty statutes is a primary limitation period of three years after reasonable discoverability of the contravention, with a 10-year longstop (subject to a fraud exception).
The Limitation Act 2010 defence to money claims (a six-year primary limitation period plus a three-year late notice period and a 15-year longstop) is an alternative limitation period for pecuniary penalties, in circumstances where there is a specific policy justification for applying that model.